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Lane
Lane, CFP, MBA, CRPS
Category: Tax
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Experience:  Providing Financial & Tax advice since 1986
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what is the statute of limitations for a c-corp officer on

Resolved Question:

what is the statute of limitations for a c-corp officer on witholding tax for the state of georgia. former officer is retired 8 years and a non resident
Submitted: 8 months ago.
Category: Tax
Expert:  Lane replied 8 months ago.

Lane :

Hi, I'm still looking for a specific limitations statute ( the statute of limitations meaning that a law - a statute - put on the book by congress - that specifically states that a collection of this "trust fund penalty" can only be made after a certain time period) ... and it's possible that there is not one ... For example, although there is a statute on collection of personal taxes ... the is NO statute of limitations on fraud, actual intentional evasion.... but while I'm lookng here's an overview from the internal IRS field manual:

Lane :



Trust Fund Recovery Penalty: Overview







  1. IRC § 7501 provides that whenever any person is required to collect or withhold any internal revenue taxes from any other person and to pay over such tax to the United States, the amount of the tax shall be held in a special trust fund for the United States. Trust fund taxes include employment taxes and certain types of excise taxes.




  2. The Trust Fund Recovery Penalty (TFRP) is based on IRC § 6672(a), which provides as follows:




    "Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax on the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. No penalty shall be imposed under section 6653 or part II of subchapter A of chapter 68 for any offense to which this section is applicable."






  3. The TFRP serves three purposes:





    • It encourages prompt payment of income and employment taxes withheld from employees and other collected taxes;




    • It makes the responsible person liable for 100% of the unpaid trust fund taxes; and




    • It facilitates collection of trust fund taxes from secondary sources.







  4. A person is liable for the TFRP if two statutory requirements are met:





    • The person is "responsible" — had the duty to account for, collect, and pay over the trust fund taxes to the government; and




    • The person "willfully" failed to collect or pay over trust fund taxes to the government.







  5. The Service may collect trust fund taxes only once, whether from the business, from one or more of its responsible persons, or from the business and one or more responsible persons.



Lane :

Ok here's a little more about the DEFINITION of "responsible party."

Lane :

Excuse men "Person"

Lane :



Persons Subject to the Trust Fund Recovery Penalty







  1. The term "person" in Section 6672 includes, but is not limited to, the following:





    • Officer or employee of a corporation;




    • Partner or employee of a partnership;




    • Member or employee of an LLC;




    • Corporate director or shareholder;




    • Another corporation; and




    • Surety or lender.




    • Payroll Service Provider (PSP)




    • Responsible parties within a PSP




    • Professional Employer Organization (PEO)




    • Responsible parties within a PEO




    • Responsible parties within the common law employer (client of PSP/PEO)






Lane :

By the way, are you asking ONLY about GA taxes (although the federal rules will still be pertinent, as they are typically morrored by the states)

Lane :

.

Lane :

THIS MAY BE USEFUL:

Lane :


  1. Regardless of a person’s corporate title, a person will not be held liable for the TFRP unless he or she has the duty to account for, collect, and pay over the trust fund taxes to the government. Even an officer of the business will not be a responsible person if he or she is an officer in title only and has no substantive duties with the business. O’Connor v. United States, 956 F.2d 48 (4th Cir. 1992). On the other hand, a person who has no corporate title but has control of financial affairs or controls payment of funds by the business, may be held responsible for the TFRP.



Lane :

And this:

Lane :


  1. The crucial test is whether the person has the "effective power to pay the taxes owed." Purcell v. United States , 1 F.3d 932, 937 (9th Cir. 1993). A person is deemed to have such power if he or she possesses the authority to exercise significant control over the company’s financial affairs whether or not such control is in fact exercised. Purcell at 937. Significant control generally relates to the person’s status, duty, and authority in the business that failed to carry out one of the three statutory duties. Davis v. United States, 961 F.2d 867 (9th Cir. 1992).



Lane :

Those performing ministerial duties without exercising independent judgment will not be deemed responsible. See Policy Statement 5-14 (formerly P-5-60), at IRM 1.2.14.1.3.

Lane :

AHHH just found this excellent analysis from a GA law frim with expertise in the area:

Lane :

Practical Problems. For some years the State of Georgia has had audit teams specifically assigned to the audit and assessment of Georgia income tax against nonresident partners and S corporation shareholders. Perhaps the most frequent pattern is that of the nonresident individual partner who has an interest in a syndicated Georgia partnership or entity. For a number of years the partnership would show a series of losses or small amounts of income until the year of the sale (or foreclosure) of the underlying assets. Frequently, the nonresident partner would report any income from the Georgia partnership on the tax return of the state of his domicile assuming, erroneously, that such income is analogous to dividend income from stocks, the income of which is generally taxable in the state of domicile of the holder of the interest. Similarly, such partners generally did not file any returns in Georgia.

Under this scenario, the nonresident partner often found himself in the following unhappy position:



  1. The taxpayer has no statute of limitations protection (or perhaps a seven year statute of limitations under O.C.G.A. § 48-3-21) with respect to the Georgia income.

  2. The taxpayer owes tax, nondeductible interest and penalty (usually waived if reported to another state or otherwise innocently omitted).

  3. The taxpayer may have any claim for refund or credit in his home state barred by the applicable statute of limitations.

  4. The taxpayer ends up with substantial professional fees for the recomputation of his income in his home state, the filing of additional returns and negotiation with the Revenue Department to obtain waiver of penalties.


 

Lane :

the nonresident partner often found himself in the following unhappy position:



  1. The taxpayer has no statute of limitations protection (or perhaps a seven year statute of limitations under O.C.G.A. § 48-3-21) with respect to the Georgia income.

  2. The taxpayer owes tax, nondeductible interest and penalty (usually waived if reported to another state or otherwise innocently omitted).

  3. The taxpayer may have any claim for refund or credit in his home state barred by the applicable statute of limitations.

  4. The taxpayer ends up with substantial professional fees for the recomputation of his income in his home state, the filing of additional returns and negotiation with the Revenue Department to obtain waiver of penalties.


 

Lane :

the nonresident partner often found himself in the following unhappy position:



  1. The taxpayer has no statute of limitations protection (or perhaps a seven year statute of limitations under O.C.G.A. § 48-3-21) with respect to the Georgia income.

  2. The taxpayer owes tax, nondeductible interest and penalty (usually waived if reported to another state or otherwise innocently omitted).

  3. The taxpayer may have any claim for refund or credit in his home state barred by the applicable statute of limitations.

  4. The taxpayer ends up with substantial professional fees for the recomputation of his income in his home state, the filing of additional returns and negotiation with the Revenue Department to obtain waiver of penalties.


- See more at: http://www.mmmlaw.com/media-room/publications/articles/georgias-new-withholding-rules#sthash.uVvDtII3.dpuf

Lane :

AHHH I see you're typingn ... I'll wait

Customer:

the taxes witheld were 2004 and no notification was subxequently sent. they are state taxes not federal and i do not know if

Lane :

In searching the Westlaw Database, I was able to find this ... I'd recommend that you get with GA attorny to see if it's applicable in this situation (In the analysis above, it seems that the law firm is saying the the statute DOES NOT apply because the person was a non-resident) ... From MY reading, however... this statute applies top ALL tax executions (execution. here, means the execution - enforcement - of a judgement of some sort ... execution is typically done through sheriff in the applicable county)

Lane :

GEORGIA STATUTES AND CODES


§ 48-3-21 - Statute of limitations for tax executions



O.C.G.A. 48-3-21 (2010)
48-3-21. Statute of limitations for tax executions


All state, county, municipal, or other tax executions, before or after legal transfer and record, shall be enforced within seven years from:

(1) The date of issue; or

(2) The time of the last entry upon the tax execution by the officer authorized to execute and return the execution if the execution and entry are properly entered or reentered upon the execution docket or books in which executions issued on judgments and entries on executions issued on judgments are required to be entered or reentered.

- See more at: http://statutes.laws.com/georgia/title-48/chapter-3/48-3-21#sthash.OO8heUTK.dpuf

Lane :

Again, O.C.G.A. 48-3-21 (2010)
48-3-21. Statute of limitations for tax executions

Lane :

Here, the actual GA code citation:

Lane :


Ga. Code Ann., § 48-3-21


§ 48-3-21. Time in which tax executions must be enforced






All state, county, municipal, or other tax executions, before or after legal transfer and record, shall be enforced within seven years from:




(1) The date of issue; or





(2) The time of the last entry upon the tax execution by the officer authorized to execute and return the execution if the execution and entry are properly entered or reentered upon the execution docket or books in which executions issued on judgments and entries on executions issued on judgments are required to be entered or reentered.








Ga. Code Ann. § 48-3-21 (West)

Lane :

Still with me?

Customer:

i do not know what type tax . i have not benn active in the corp since 2005 and company had no assets and wasinsolvent

Customer:

i have been nonresident since 2006 and have not been registered exec since 2005

Lane :

Well, this is a very "catch-all" statute ... it references All STATE, COUNTY or OTHER TAX executions ... so this is the best news I could deliver here ... that ALL these types of taxes are cover ... AND that this is a statute on EXECUTIONS which means that even if there is a line or other court judgment obtained ... it cannot be enforced ... I cannot guarantee this because I do no know ALL of the information here ( and WOULD NOT want to make guarantees) BUT I WOULD SUBMIT that this statute is very all encompassing (in terms of GA taxes) and in terms of being a statute that regards execution (enforcement)

Lane :

Having this statute (again § 48-3-21. Time in which tax executions must be enforced) in hand, should make a meeting or even a phone call to an attorney in GA to run this "against" YOUR situation to make sure it applies, ery efficient ... This IS the answer to your question; SEVEN YEARS ... the way to be SURE of this, however is to take this "ammunition" to a GA tax attorney

Lane :

You have the extent of MY wisdom here :)

Lane, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3693
Experience: Providing Financial & Tax advice since 1986
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